Cheap Content, Growing Reach Make Snapchat a Rising Star

Thousands of revelers descended on the Coachella music festival last weekend to rock out to their favorite bands and party day and night. But a far bigger audience from around the world -- at least 40 million -- joined in remotely through video snippets from Snapchat.

Those snippets, no more than 10 seconds long -- bands on stage, crazy dancers, people in swimsuits gliding down a Slip 'n Slide -- were shot and posted by Snapchat users at no cost to Snapchat. The fast-growing Venice start-up simply stitched clips together using software. It's now selling advertising for those programs; with free content, the profit margins would be huge.

Critics dismissed Snapchat early on as a smartphone app that didn't do much but let lovers trade the type of photos they didn't want saved. But the huge audiences that Snapchat is gathering on a new feature called Stories is the latest example of how a tiny company can rise up fast with a business strategy that could make it the next hot technology sensation out of California -- much like Facebook in its early days. Early Stories advertisers include Coca-Cola, Universal Pictures, Macy's and Samsung.

Consider the potential: Top broadcast shows, such as CBS' "NCIS," average about 20 million viewers, half the Coachella audience. Snapchat's reach, advertising industry analysts say, is big enough to siphon ad dollars otherwise spent on television and YouTube.

"You have a TV-sized audience all viewing at once, or at least within a day," said Michael Boland, chief analyst at ad consultancy BIA/Kelsey. "Brand advertisers really like that."

The under-35 crowd, spending less time with TV, has been a pesky lot to track down for advertisers, but Snapchat is among the few social media apps in which they see possibility. Spending on mobile ads that take a user's location into account is...

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